Theory of Constraints

Question:
Taylor company produces two industrial cleansers that use the same liquid chemical input: pocolimpio and maslimpio. Pocolimpio uses two quarts of the chemical for every unit produced, and maslimpio uses five quarts. Currently, Taylor has 6,000 quarts of the material in inventory. All of the material is imported. For the coming year. Taylor plans to import 6,000 quarts to produce 1,000 units of Pocolimpio and 2000 units of Maslimpio. The details of each product's unit contribution margin follows:

Taylor company has received word that the source of the material has been shut down by embargo. Consequently, the company will not be able to import the 6000 quarts it planned to use in the coming year's production. There is no other source for the material.

Required

a. Compute the total CM the company would earn if the company could import the 6,000 quarts of the material

c. Assume that Pocolimpio uses three direct labor hours for every unit produced and that Maslimpio uses two hours. A total of 6,000 direct labor hours is available for the coming year. Formulate the linear programming problem faced by Taylor Company

Solution Preview

Taylor company produces two industrial cleansers that use the same liquid chemical input: pocolimpio and maslimpio. Pocolimpio uses two quarts of the chemical for every unit produced, and maslimpio uses five quarts. Currently, Taylor has 6,000 quarts of the material in inventory. All of the material is imported. For the coming year. Taylor plans to import 6,000 quarts to produce 1,000 units of Pocolimpio and 2000 units of Maslimpio. The details of each product's unit contribution margin follows:

Pocolimpio Maslimpio ...

Solution Summary

The solution uses the theory of constraints to determine the total CM the company would earn. It also determines the optimal usage of the company's inventory of the material.